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Who is lying? FTX's new CEO stated before the hearing: FTX US is not independent from FTX.

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Who is lying? FTX

The House hearing will be held on 12/13 at 23:00 Taiwan time, and the new CEO of FTX released a written statement before the meeting, stating that FTX US is not independent as claimed by SBF. In interviews with Forbes, SBF reiterated that bankruptcy is a very inappropriate suggestion and claimed that the new team made $700 million in legal fees in the previous Anlong case.

Testimony of John J. Ray III

John Ray stated that filing for Chapter 11 bankruptcy is the best way to preserve all remaining value of the FTX Group, which is his first action since taking over.

He mentioned that the business restructuring is challenging, with many issues still being clarified. Besides poor management and excessive leverage, he found several unacceptable practices within FTX, including:

  • Lack of audits, relevant financial reports, and independent governance.

  • No security mechanisms to prevent executives from using user assets.

  • 500 investments involving FTX Group funds lacking relevant documentation.

  • Alameda being able to lend FTX funds for trading and investments without effective restrictions.

The entire restructuring plan consists of five core objectives:

1. Restructuring and Management:

This includes accounting, cybersecurity, human resources, audits, risk management, etc. John Ray has hired independent third-party teams in various fields, such as Alvarez & Marsal, Alix Partners, Ernst & Young.

2. Asset Protection and Recovery:

John Ray mentioned that most assets are difficult to trace due to loss, theft, or lack of critical data documents. Currently, over $1 billion in digital assets are being protected by third-party companies.

3. Transparency and Legal Investigation:

They are closely cooperating with domestic and foreign regulatory agencies to gather evidence on the main causes of bankruptcy.

4. Efficiency and Coordination:

Coordinating with subsidiaries in other jurisdictions in the bankruptcy process.

5. Ultimate Goal:

To sell FTX Group's businesses and digital and physical assets to maximize value for all stakeholders.

FTX US Not Independent from FTX

John Ray mentioned that some questioned why the entire FTX Group entered Chapter 11 bankruptcy proceedings, especially FTX US. He pointed out:

The reason is that FTX US is not independent from FTX.com. Chapter 11 bankruptcy protection is necessary to prevent a run on FTX US and allow time to identify and protect related assets. This is the right decision, and the relationship between FTX US and other FTX companies is now clearer.

He emphasized that he will not comment on recent statements made by SBF in various interviews. Many things still need clarification at FTX, but they have confirmed several facts:

  1. FTX user assets and Alameda funds are intermingled and unclear.

  2. Alameda leveraged user funds, resulting in significant losses.

  3. FTX made extensive external investments from late 2021 to 2022, with the value of some invested companies far below the funds FTX invested.

  4. Loans and funds provided to insiders exceed $1 billion.

  5. Alameda deployed funds across major exchanges for market-making but faced challenges in tracing funds due to limited legal protections in certain regions.

SBF Interview: Reorganization Team Previously Earned $700 Million

According to a Forbes interview, SBF reiterated his belief that FTX should not have entered bankruptcy proceedings.

He emphasized that during the events, he received inappropriate and operationally unsound bankruptcy filing suggestions, believing that bankruptcy is not the only option. Multiple financing proposals are being discussed, especially since FTX US has the ability to pay.

He also mentioned that through his research, he learned that the total legal fee income of the new restructuring team in the previous Anlong incident was approximately $700 million.